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Published: Thu, June 01, 2017
Economy | By Melissa Porter

RCom recovers as management reassures investors on loan repayments

RCom recovers as management reassures investors on loan repayments

The shares of Anil Ambani's Reliance Communications fell as much as 20 per cent to an all-time low today after it reported a Rs966 crore fourth-quarter loss and there were renewed worries about its heavy debt load.

According to rating agency ICRA, the debt protection metrics of RComm have further deteriorated with increase in debt and weakening in profitability. ICRA and CARE lowered their grading of debt instruments several notches to the default status, citing similar reasons.

Telecom operator Reliance Communications (RCOM) informed its lenders that it would repay Rs 25,000 crore after closing its transactions with Aircel and Brookfield.

RCom had reported loss of Rs 948 crore in March quarter, compared to a net profit of Rs 79 crore in year-ago period, hurt by the intense price war unleashed by newcomer RJio.

To strengthen the business Reliance Communications is merging its wireless business with rival Aircel, and is also selling a 51 percent stake in its radio masts business to Canada's Brookfield Infrastructure Group for Rs 100 billion ($1.54 billion). "The telecom sector in India has been very adversely impacted during 2016-17 by competitive intensity on a scale never witnessed before in the country", RCom said in a statement. They were down 13 per cent in early noon trade.

Aircel's debt will reduce by Rs 4,000 crore or $615 million or 22 percent of total debt, upon completion of the transaction.

For Reliance Communications, a few banks will be forced to "treat the account as an NPA after a fortnight", said ET report.

It also downgraded the short-term rating to "A4" from 'A3+' for the Rs 7,314-crore short-term fund-based/non-fund based limits (including unallocated limits) and the Rs 2,000-crore commercial paper programme of Reliance Communications.

The latest statement from the telecom operator comes as a way of reassuring investors and lenders that it is serious about paying back the tens of thousands of crores of rupees it owes to banks and bondholders, even after it demerges its wireless operations into a new company.

Analysts said RCom is likely to swiftly lose market share to Reliance Jio as well as Bharti Airtel, Vodafone India and Idea Cellular, and be left with precious little for capital expenditure after meeting huge interest obligations.

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